Chandrasekhar and Tudor (Child support)

[2020] AATA 5825

Chandrasekhar and Tudor (Child support) [2020] AATA 5825 (11 December 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/BC018962

APPLICANT:  Mr Chandrasekhar

OTHER PARTIES:  Child Support Registrar

Mrs Tudor

TRIBUNAL:Member S Letch

DECISION DATE:  11 December 2020

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that:

(a) for the period 16 July 2019 to 31 October 2022, Mr Chandrasekhar’s adjusted taxable income is varied to $143,144;

(b) for the period 16 July 2019 to 31 October 2022, Mr Chandrasekhar’s self-support amount is increased by $11,000.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – liable parent’s necessary commitments of self-support – high costs of travel – a ground for departure established – decision to depart – decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. Mr Chandrasekhar and Mrs Tudor are the parents of [Child 1], born 2005, and [Child 2], born 2008 (the children). Both children are recorded as being in the 100% care of Mrs Tudor.

2. On 14 September 2019, Mr Chandrasekhar applied to the Child Support Agency (CSA) for a change of assessment on the following grounds:

   ·that his necessary expenses for self-support significantly reduced his ability to support the children (the ground commonly known as Reason 7);

   ·that his or Mrs Tudor’s income, property and financial resources or earning capacity make the child support assessment unfair (the grounds commonly known, respectively, as Reasons 8A and 8B).

3. The administrative assessment in place prior to Mr Chandrasekhar’s change of assessment application on 14 September 2019 required Mr Chandrasekhar to pay an annual rate of child support of $14,614 for the period 16 July 2019 to 30 November 2019, based on his 2019/20 estimate of income of $81,264, and Mrs Tudor’s 2017/18 provisional adjusted taxable income (ATI) of $50,076, and for the period 1 December 2019 to 30 June 2020 he was assessed to pay an annual rate of child support of $14,714, based on his 2019/20 income estimate of $81,264, and Mrs Tudor’s 2018/19 ATI of $12,098.

4. On 2 January 2020, an agency and decision maker, [Mr A] found Reason 8A established and changed the assessment to provide as follows:

   ·for the period 16 July 2019 to 28 February 2021, Mrs Tudor’s ATI is set at $98,000;

   ·for the period 16 July 2019 to 30 June 2020, Mr Chandrasekhar’s ATI is set at $142,967;

   ·for the period 1 July 2020 to 28 February 2021, Mr Chandrasekhar’s ATI is set at $146,398, reflecting an increase in his ATI by the current 2.4% child support inflation factor of $3,431.21 (rounded up).

5. On 21 January 2020, Mr Chandrasekhar objected to [Mr A]’s decision of 2 January 2020, and on 7 April 2020, an agency objections officer set aside [Mr A]’s decision, deciding, in substitution, that:

   ·for the period 1 July 2019 to 28 February 2021, Mrs Tudor’s ATI is varied to $98,000;

   ·for the period 1 July 2019 to 28 February 2021, Mr Chandrasekhar’s ATI is varied to $136,598; and

   ·for the period 1 July 2019 to 28 February 2021, Mr Chandrasekhar’s self-support amount is increased by $7,213, in recognition of his high travel costs.

6. On 1 May 2020, Mr Chandrasekhar applied to the Tribunal for review of the objections officer’s decision of 7 April 2020.

7. The Tribunal, constituted by Member [B], heard the matter over the course of 22 September 2020, 17 November 2020, and 4 December 2020. Both parents attended at the hearings on those dates via conference telephone and gave affirmed evidence. Mrs Tudor’s partner, Mr Tudor also gave affirmed evidence at the hearing on 17 November 2020, with the consent of Mr Chandrasekhar.

8. This matter was transferred to me following Member [B] recusing himself from further involvement in the matter. In short, Member [B] was involved in contact with Mrs Tudor outside of a formal hearing process. Member [B] invited both parties to express a view whether he ought to continue with the matter, or whether the matter should be reconstituted. Mrs Tudor’s preference was for the latter.

9. I have had the benefit of being able to listen to all of the audio recordings of the various prior proceedings (including the affirmed evidence of both parties, and of Mrs Tudor’s husband, Mr Tudor) when I conducted a hearing with both parties by conference telephone on 11 December 2020. I took into account the CSA materials, and additional materials submitted by Mr Chandrasekhar (Exhibit A), and Mrs Tudor (Exhibit B).

CONSIDERATION

The legislative framework

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Act). A formula is used. It takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children and the level of care provided by each parent.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make such a departure determination if three matters are established:

   ·     one, or more than one, of the grounds for departure referred to in subsection 98C(2) exists (subparagraph 98C(1)(b)(i));

   ·     a departure is just and equitable as regards the children and each parent (sub-subparagraph 98C(1)(b)(ii)(A)); and

   ·     it is otherwise proper to make a departure decision (sub-subparagraph 98C(1)(b)(ii)(B)). 

3. Subsection 98C(2) provides that the grounds for departure are the same as the grounds set out in subsection 117(2).

13.If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Act. It permits a range of determinations, including varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Issue 1 – Is there a ground to depart?

1. Subparagraph 117(2)(c)(ia) of the Act, commonly referred to by the CSA as reason 8A, provides as a ground for departure:

   (c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:

   …

   (ia)      because of the income, property and financial resources of either parent; or

2. The starting proposition is that the child support formula should apply. Only in special circumstances should a departure be made. The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the legislature is that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman v Gyselman (1992) FLC 92-279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The Tribunal’s approach to the interpretation and application of the particular grounds in subsection 117(2) must be guided by that qualification.

16.Mr Chandrasekhar’s income was not in contest. He is a [Occupation 1] (with a high level of travel costs to travel between [two cities], discussed later in these Reasons). There is no dispute that his 2019/20 adjusted taxable income of $143,144 (with some adjustment for self-support costs) is representative of his financial capacity.

17.In the current assessment, Mr Chandrasekhar’s estimated 2019/20 adjusted taxable income of some $81,000 was applied to the assessment from July 2019 (resulting in a difference in his annual child support liability of over $10,000 compared to assessing his income as some $143,000). In the special circumstances of the case, the child support assessment is rendered unfair. There is a ground to depart from the formula.

Issue 2 – Is it just and equitable to depart from the administrative assessment?

18.The next relevant consideration for the Tribunal is whether a departure from the administrative assessment is just and equitable. This enquiry directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

1. I explained to both parties at the commencement of the hearing that having had the benefit of hearing the sworn evidence of both parties, and Mr Tudor, that I had formed the clear view that Mrs Tudor’s explanation for the deposits into her bank account as plausible and credible. I expressed the view that the approach by the CSA – to extrapolate deposits into a bank account to formulate an adjusted taxable income – as a very blunt instrument for that task.

2. The evidence establishes that Mrs Tudor performs some administrative work and is paid a wage. I note the business provides [specified] services, and that in a very practical sense, Mr Tudor (along with his small number of qualified employees) “is” the business. There is no serious suggestion that Mrs Tudor – who is not a qualified [Occupation 2] – is [doing Occupation 2 work] or performing anything other than administrative support. This is not a case of a family business arrangement of “blurred lines” in situations where both parties   are making substantial contributions to the income of the business. Mrs Tudor’s evidence at the hearing was that, on average, she works 15 to 20 hours per week at around $15 per week (or a maximum of around $300 per week, or $15,000 per annum). Her 2019/20 adjusted taxable income has been assessed by the Australian Taxation Office as some $9,000.

3. Notably, Mrs Tudor has the primary responsibility for caring for four young children, and would not be well placed, it seems to me, to be able to work at a full-time capacity.

4. As pointed out to Mr Chandrasekhar during the hearing – because of his relatively high income, and the fact Mrs Tudor has 100% care of the children – adjustments to Mrs Tudor’s income, under the formula, make relatively little difference in the context of the overall assessment. Before allowing any adjustment to Mr Chandrasekhar’s self-support amount (as a result of his high travel costs), even if Mrs Tudor’s income was to be assessed as $50,000 (which might be representative of a full-time wage for an employee providing administrative support), Mr Chandrasekhar’s annual liability would be some $28,000; at $15,000 (or $9,000), his liability would be some $29,000.[1]

   [1] Even if Mrs Tudor’s income was assessed at $98,000 – which clearly well exceeds her financial position – Mr Chandrasekhar’s annual liability would be some $26,000 (before any adjustment to his self-support costs).

5. Mr Chandrasekhar makes the very valid observation that Mrs Tudor is a shareholder in her husband’s business; to date, she has not received a dividend from that business. However, I note that in the event the director’s resolve to pay Mrs Tudor a dividend, that sum would form part of her adjusted taxable income; in the ordinary course of the child support formula, this sum would be assessed in the future (provided, as I pointed out to Mr Chandrasekhar during the hearing, no adjustment was made in this process to set Mrs Tudor’s income by a departure determination).

6. I accept Mrs Tudor’s evidence concerning her contribution to the business; even if she was working full-time and her contribution was assessed as $50,000 per annum, there would be no material difference to Mr Chandrasekhar’s liability. I consider the better approach to be to leave the assessment of Mrs Tudor’s income under the formula arrangements – this has the advantage of the ongoing assessment picking up an increase to Mrs Tudor’s adjusted taxable income (including, for example, if she receives a dividend in the future).

7. In relation to Mr Chandrasekhar’s high costs of travel to work, Member [B] requested on multiple occasions that Mr Chandrasekhar supply a schedule of his costs (which he estimated to exceed some $11,000). Member [B] observed (quite appropriately) that it was not enough for Mr Chandrasekhar to provide the Tribunal with reams of receipts and flight itineraries and expect the Tribunal to calculate his costs.

8. I observed during the hearing that in the absence of Mr Chandrasekhar presenting his case in a digestible form, I was disinclined to consider going beyond the figure of some $7,000 accepted by the CSA as representative of his costs.

9. I invited Mrs Tudor to express her view about whether I should accept Mr Chandrasekhar’s claim for some $11,000 per annum as representative of his annual expense; Mrs Tudor did not oppose that outcome. The difference between increasing Mr Chandrasekhar’s self-support amount by $7,000 as opposed to $11,000 amounts to approximately $900 per annum.

10. Given the consensus between the parties, I am satisfied it would be just and equitable to increase Mr Chandrasekhar’s self-support amount by $11,000 per annum in recognition of his high cost of travel to work.

11. Neither party raised any other particularly exceptional expenses. In terms of going forward (the present departure decision expires on 28 February 2021), neither party expressed any particularly strong view about how far into the future a departure should apply.

12. It seems to me that Mr Chandrasekhar’s employment and income situation is likely to remain relatively stable. Any changes in Mrs Tudor’s adjusted taxable income will be caught in the usual way in the annual rolling child support formula arrangements. These factors would tend to suggest a desirability to go further forward in the interests of giving certainty to the parties, and reducing the need to engage with the CSA.

13. Accordingly, I consider it would be just and equitable to vary Mr Chandrasekhar’s adjusted taxable income to $143,144 from 16 July 2019 until 30 October 2022 (at such time the 2021/22 adjusted taxable incomes of both parties may be ascertainable). The Tribunal observes that if, in the meantime, there is a significant and material change in the circumstances of either party, they will be at liberty to make a fresh change of assessment application with the CSA.

Issue 3 – Is it otherwise proper to make a departure determination?

32.The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child.

33.The rate of child support should reflect the obligation of both parents to take financial responsibility for the children and, where increased, may decrease any income-tested benefits payable. A departure is therefore proper.

34.As the Tribunal has reached a different conclusion to the objections officer, the decision under review will be set aside.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that:

(a) for the period 16 July 2019 to 31 October 2022, Mr Chandrasekhar’s adjusted taxable income is varied to $143,144;

(b) for the period 16 July 2019 to 31 October 2022, Mr Chandrasekhar’s self-support amount is increased by $11,000.